Mahindra set to finalise deal to sell stake in SsangYong Motor soon1 min read . Updated: 01 Jan 2021, 03:40 PM IST
During a digital press conference today, Mahindra and Mahindra said it is likely to name the new buyer sometime next week.
Mahindra and Mahindra is getting closer to finalise a deal sell its stake in its Korean subsidiary SsangYong. The Indian carmaker is likely to seal the deal by the end of next month and an announcement of the new buyer may happen as soon as next week.
During a digital press conference today, Pawan Goenka, MD at Mahindra and Mahindra said that after the deal is finalised, the Indian carmaker’s stake in Ssangong will go down to only 30 per cent. Presently it holds 75 per cent in the Korean company.
In December, Mahindra's South Korean arm SsangYong Motor had filed for bankruptcy. The Korean automaker has outstanding loans aggregating to 100 billion Korean Won (around ₹680 crore).
In April this year, Mahindra and Mahindra board had rejected a proposal to inject any fresh equity into SaangYong Motor. Following Mahindra’s earnings in the quarter to March, where the Korean unit accounted for 80% of losses, Mahindra said it was ready to cede control of SsangYong.
Mahindra acquired the South Korean SUV maker after the 2007-08 global financial crisis when several Indian and Chinese companies were vying for foreign firms to access new technologies and achieve a global footprint. The Indian carmaker had acquired the loss-making SsangYong in 2010 but failed to turn it around since then despite several attempts.
SsangYong not only failed to deliver on its SUV promise but also became a liability for the Mumbai-based firm as Mahindra continued to make new investments without adequate returns.
Mahindra lost substantial market share in the SUV segment amid intensifying competition from rivals Maruti Suzuki and Hyundai Motor.
SsangYong has been struggling with deteriorating earnings since 2017 when it slipped into the red with a net loss of 66 billion wons as against a net profit of 58 billion wons in 2016. In 2018, its net loss rose to 62 billion wons and then ballooned to 341 billion wons in 2019.
Battered by the pandemic, SsangYong has continued to post losses through the March, June and September quarters. It has accumulated operating losses of 309 billion Korean won (close to ₹2,100 crore) in the nine months to September despite reducing fixed costs.